STOCKS GET AROUND THE WORLD GET SLAMMED: Here's What You Need To Know
Sam RoMar 4, 2014, 02.30 AM
Tensions on the Ukraine-Russia border have the global financial markets in risk-off mode.
First, the scoreboard:
- Dow: 16,168.0 (-153.6, -0.9%)
- S&P 500: 1,845.7 (-13.7, -0.7%)
- Nasdaq: 4,277.3 (-30.8, -0.7%)
And now the top stories:
- Markets around the world got slammed. Russia got hit the worst with its ruble tanking and its stock market dropping 12%. The Ukranian bond market got annihilated, with short-term interest rates exploding to nearly 50%. Western Europe also got slammed led by Germany, a major importer of Russian gas.
- With the Russian economy already struggling to grow, most Wall Street experts believe Putin isn't like to go through with a major military action. ""Direct costs of war to Russia could reach at least 3% of GDP, which consists of nearly half (or about $30 billion) of gas exports from Russia to Europe, which is carried out through Ukraine and which would most likely be disrupted in case of a war," said Vladimir Osakovskiy, an economist at BofA Merrill Lynch. Credit Suisse's Alexander Redman and Arun Sai note that Russia could also get hit with economic sanctions while risking getting effectively shut out of the global capital markets.
- Meanwhile, there was lots of economic data coming out in the U.S. and abroad. The ISM manufacturing index climbed to 53.2 in February from 51.3 in January. The new orders sub-index jumped to 54.5 from 51.2. "Of the 18 manufacturing industries, 14 are reporting growth in February," said the ISM.
- Personal incomes climbed 0.3% and spending increased by 0.4% in January, both beating economists expectations. "Much stronger than expected results as a result of BEA's initial rough estimates of the impact of Obamacare on healthcare demand and Medicaid enrollment as well as a much bigger than expected spike in spending on utilities," noted Morgan Stanley's Ted Wieseman.
- The BEA reported that the core PCE deflator - the Federal Reserve's favorite measure of inflation - declined to 1.1% in January from 1.2% in December. "Core PCE monthly changes have been 0.1% every month from July to January," noted Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. "June was the last month we had a 0.2% rise. If we don't get more 0.2% monthly changes, the year-on-year figure will sink closer to zero-dot-zero. Fall to nothing, bordering on deflation. Core CPI inflation is higher, less worrisome to the deflation scare story, at 1.6% year-on-year in January. The difference is different accounting for medical care services prices, so there is no too-low inflation problem if you look at CPI, like most of the world does."
- One person who isn't fazed by any of the uncertainty in the world is billionaire Warren Buffett, who told CNBC Becky Quick that he would be buying stocks today amid the sell-off. "I never really buy businesses based on macro factors," he said. He noted that he invested in his first business in the wake of the attack on Pearl Harbor.
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